I remember when I was early in my career
in the life insurance industry
and I was selling
the same product I sell today
whole life insurance
I was just working for other people
and I was always
always encouraged to sell policies
with high base premium.
When we talk about
policy design all the time
your money can go toward premium
or PUAs [Paid-up additions]
but I was always encouraged or really told
hey you should be selling policies like this
with higher base premium
and the reason why
was really because it generated
the most compensation
or commission for the agency
my manager and me
and they would always lead with hey
you will make the most money
doing it this way.
And I got it and I saw it
I'm like okay I do understand that
but being the nerd that I am
and learning the software in and out
I started to dig into it and say
hey wait a minute
like this isn't what I want
can I design a policy like this for myself?
And I was just told
you can't do that
and you can imagine
how I'm designing that policy for myself
minimum premium
minimum commission
maximum cash value
so they tell me no you can't
and what do you think my answer
my response is?
Why not?
Like why can't I do that?
It was just oh you can't
let's just move on
we don't do things like that.
And why I mention this
is in the insurance industry
there's a bit of a
call it a culture that goes on
and this is just for my observation
where I used to work different places
and what I see
when I speak to different agencies
or how they operate
is whatever agency
or producers
single producers out there
running a small business
write the most
or yeah call it write
meaning they sell the most premium
base premium
which going back to policy design
as a consumer
that does not show up in cash value
right off the bat
that generates the highest commission
the producers or agencies
that write the most premium
typically have the greatest bragging rights
they get all the recognition
companies love them
because they're driving revenue
for the company
which hey makes sense
you know businesses
are in business to be profitable
I get all that
but as I look at that
I'm not saying that that's bad
high based premium sales
where I have an issue with it
is often with whole life insurance
people are interested in it
at least the people we work with
because of the cash value
they see and hear what big banks do
corporations
wealthy individuals
that's what they want
they want to copy them
and what wealthy individuals do
what banks do when they buy a policy
they have the majority
of their cash value upfront immediately
and the commission
the commission rate on those products
are minimized
so the agent makes a minimal amount
because the consumer
reaps all the benefits
their value is there right off the bat.
So really my thing was
hey if people want
a basic whole life insurance policy
that fits into their overall planning
then hey that's great
but if they're coming to you
or they express interest
in a cash value life insurance policy
for the cash value
why on earth
would you try to sell them something
that is not in their best interest?
So I'm going to go through
some visuals here
but really I want to talk about
the importance of how you engage
with consumers
treating them as if it were you
because when I first started
I was nerdy with the software
I dug into policy design
I was told hey
you should sell policies like this
I saw the software
I saw what could be done
I said hey why don't we do it this way
and again I was told
well we don't do that
or you just can't
you could
it just generated
next to nothing in commission.
So the first thing
that I feel you should always think
when working with anyone
is what if it was me
and not saying hey
if it's me you know I would want this
because I can justify
a higher base premium
no no no
if you were actually that person
you understand
what they're trying to accomplish
maybe they want a cash value
life insurance policy
so they can pound a lot of money
into the policy
use it as a personal line of credit
having that cash upfront is critical
if that is their goal.
If you were them
what would you want to see?
And from a business perspective
if you do this
you're going to grow
no matter what 10 out of 10 times
because you're a resource for the person
not someone just trying to force a sale
like if I sell you what I want to sell you
what's going to happen?
You're going to go look for
what you want elsewhere
you're going to keep asking me questions
you're going to feel like you're fighting me
it's going to be awkward
no one likes that feeling
I don't
we've all been there.
Here's one of the most important things
listen
listening to the consumer
to hear what they are
actually interested in
that will go such a long way
if you're a consumer
you appreciate this
or if you're in sales or business
if you've been on the other side
when you listen to people
that's how you win at the end of the day.
Answer questions directly
and use visuals where possible.
Let's take a look at an example
I want to see one
so a question we get a lot of times
is hey Steve I've been looking
at a whole life insurance policy
I'm interested in the banking concept
whatever it might be
and I'm just not getting
the cash value
I think it can be better.
Like when I pay a dollar into a policy
I have nothing in cash value
or I see 50%
like can I make it better?
I'm trying to get
more information around it
and the answer is yes
you know when you design a policy
you can have anywhere from 0
to call it 80% to 90% of your payment
in the 1st year
but as I just said that right there
if you're not in the business
that can be a little bit confusing
so when you have the opportunity
to use visuals
do so.
So here's a policy very basic
$10,000 per year going in
same company
same product
same out of pocket for the client.
The first one on the left
is we see 100% premium
you know where we talk about
where money can go toward
the premium piece
or directly toward PUAs
which grow cash value immediately
this is all premium
or all insurance expense
there's your cash value right off the bat
what's highlighted in yellow
is when he breaks even
so year 13
he's paid in a total
at $10,000 per year
of $130,000
and he has just about $130,000.
Then we've got this middle option
50/50 split
which means he has 50% of his payment
toward insurance premium
expenses
and the other 50%
plowing toward cash value.
More upfront we see
breakeven point
is better than the last one $90,000
he has more long term as well
but still
if you're interested in cash value
would you want to put $10,000 in
and see half of that just go out the door
to buy a life insurance death benefit?
If you're in a position
which I hear all the time
people express this
I don't care about the death benefit
probably not.
But then you've got this option
same company and product
$10,000 going in
about 88% right off the bat
he's positive by year 5
and he's got more short term
and long term as well
just gets better and better over time
and this has to do with
the design of the policy
and company selection
things we talk about all the time
in our technical videos.
But listening
when someone has a question
answering it directly
not beating around the bush
so important
we're going to look at an example
of a very popular question
at the end of this video.
Tone
this is important
and recording yourself
or having someone
that can speak honestly to you
and give you constructive criticism
about your tonality
when you speak with individuals
can be helpful
and we've got to be
humble enough to take that criticism.
But be respectful
humble
think of it this way
when you work with people
do you like when they are humble
when they're respectful toward you
when they listen?
Here's a big one
don't get annoyed
so if you have to explain
something to someone
over and over again
because you feel like they're not getting it
that's not on them
no no no.
First, remember where you started
you're in the industry
so this is me talking to you as an agent
if you're in the business
but how long did it take you
to accumulate that knowledge?
It takes time
it took me several years
to learn a lot of this stuff
and I'm still learning
as we always encounter new tax laws
product changes
all that good stuff.
But here's my big thing
it's one thing to have knowledge
on a particular topic
it is a completely different thing
to communicate that effectively.
If you have to repeat yourself
it means that you
the professional
did not explain it properly
simple as that
that's the truth
don't blame it on the client
don't say oh you got to do more research
you got to change your thinking
something like that
no no no no
if someone didn't get it
explain it again
explain it in a different way
use visuals
demonstrations
illustrations
whatever it might be.
Practice
that's the key
practice not communication
effective communication
does not come naturally to everyone
it doesn't for me
like you've heard me say that before
practicing it over and over again
this way the tonality is proper
the pace is proper
good use of illustrations
like you can have
the best product in the world
but if you can't communicate it effectively
you're not going to reach
the audience you're looking for
and if you struggle with that
partner with someone
who is good at communication
or develop it
and that's fine
we can practice
practice makes perfect.
So just remember this
don't get annoyed
don't blame the client
no no no no it's you
practice and it'll help you too
people will see it
and they'll appreciate it as well.
So let's go through some examples of
directly answering questions
with visuals here.
Here's a question we get frequently
should I borrow from a policy
for real estate
but should I do it
when I look at the policy
it doesn't make sense
because my cost to borrow
is higher than my earning rate
and this frustrates so many people
to death
real estate investors
business owners
where they're told
hey when you pay money
into a cash value life insurance policy
it's compounding for you forever
the entire balance
so you can borrow from it
and experience that
uninterrupted compounding
you're going to have all this money
and that's true
it's powerful
but where people feel hurt
or taken advantage of
is when they actually crunch the numbers
they say wait a minute
like I get that I'm earning
compound interest on everything
but I'm paying more
on the outstanding loan
than what I'm earning
like from a numbers perspective
I the consumer
am not comfortable with that
can you please explain to me
why it makes sense
or show me some alternatives.
Remember if you're the client
so if it's you
and you feel uncomfortable with that
do you want someone
to come and try and explain to you
hey well it does work
you just kind of have to trust the process
go through it?
No like you got to show me it
in reality
what works
what doesn't work
think again if it's you
be respectful
tonality's got to be proper here.
How do you address that objection?
Here's how we do it
provide transparency.
Now we've got videos
where we walk through this in full detail
I'm not going to do that in this video
as much as I would like to.
So what do we see here?
policy $50,000 per year
on a 40-year-old individual
breaking even between 3 and 4
everything's set up properly
but here's his annual
earnings rate in the policy
and then there's the average
earning rate over time
he's taking a policy loan
the net cost to borrow
you can see it over here
what is it?
4.31%
So he's borrowing at what?
4.31% over time.
What is his earning rate
as you look at this?
Is it 4.31% at any point in time?
No
I don't see it at 4.31%.
So what does that mean?
This frustrates people
all you have to do
is be direct with them
when I say direct
just straight up
it's okay
if you're offering a product
to point out the negative features of it
yes talk about the good features
everything
why you buy it
why you own it
why you believe in it
but don't just brush over the things that
a lot of people object about
if you do that
it ain't going to go that well.
So annual IRR
if we look at the peak
it's at age 50
4.14%
that's what he's actually earning
on the policy annually
his average IRR is just over 3%.
People look at this and say okay
if I take a loan
$300,000 in this example
for some real estate
that might produce me 12%
whatever it might be
but I look at this
my cost to borrow is 4.31%.
2 objections
(1) I'm not earning that
so I feel like I have a negative spread
and then (2)
I can find a better rate in the market
like it doesn't make sense
so this is an objection
what you don't want to do
is try and force someone
to do something
that they're not comfortable with.
Has anyone ever tried to do that to you?
No, it's not going to work
well explain hey the advantage to this
is you have complete control
when you take this loan out
you can pay it back however you want
whenever you want
you cannot pay it back
so that you've got some advantages there
there's a ton of advantages
but with that said
if you're not comfortable
with the loan rate
a nice alternative
that a lot of people consider
is this
a collateral loan
we talk about this frequently
this is leveraging the exact same policy
we're not borrowing from the policy now
we're taking it to a bank
or a lender
obtaining a third party loan
typically a line of credit
very easy to be approved for
minimal underwriting
quick turnaround time
and look same policy here
IRR annual on average
if we look at the same point in time
at age 50
4.14%
3.12% on the average
and there's your cost to borrow 3%.
If they're larger loans
sometimes you see it 3%
it's rare to see it lower
but you can get it
depending on the policy type
and policy size that you have
my point is now all of a sudden
we've got that safe
liquid
tax-free asset to position money
you got the death benefit as well
which is fantastic
but in respect to the cash value
it keeps on growing
and now I'm actually earning more
than what I'm leveraging it to borrow
to borrow against
so now it makes sense for the numbers
and I can always switch back
to the policy loan
if that makes more sense in the future
awareness is the key there
you have to build the awareness
answer the person's questions
with transparency
use visuals where appropriate
and where's the big thing again
don't get annoyed with them
with this kind of stuff
because this
can take some time to explain
can take some time for someone to grasp
whether it's before they start a policy
or more importantly
after they start a policy
so important to do that
that's where
I've seen friction occur in the industry
because people feel like their
agents feel like they've got to
explain something after the sale
so they're not getting paid for it
no you got paid upfront
so you do owe the person that time
to really explain to them
the pros and cons there.
And then lastly
the always a hot button question
what do you make in commission?
Be upfront with it
and you can go through
your specific rates
you can provide transparency
this usually comes up
in competitive situations
where someone asks hey
like the numbers that I've seen
with another agent or with you
are much better
than what I was presented elsewhere
and it's the same company and product
like what is going on here?
Is it the commission?
It comes up frequently
now if you get that question as an agent
do not bad mouth the other person
no no no
don't do that
just be transparent
show them how it works
do not be negative in this case.
So what are you making commission?
Well the commission rates really
are primarily driven off
of the base premium
so going back to where money can go
the premium
or toward the PUA component
premium dollars drive compensation
really in the 1st year
rates range from anywhere from 50%
sometimes less with some products
all the way up to 130%.
I'll give you a quick example
this was an actual case
we encountered recently
where someone was presented
a whole life insurance policy
he sent this to us
before he started it
he's got a 1035 exchange
the commission was actually higher
than what we're showing here
but big dollar amount
he's paying in $1,500,000 over 5 years
so $300,000 per year
plus a 1035 exchange
here's the agent commission
with the first option he was proposed
over $150,000 on one transaction
this guy is 100% interested
in the cash value
like that's why he wants it
the death benefit is great
but he's interested in the cash value.
Is this policy
aside from what the commission is
maximized for cash value?
The answer is no
you may have seen
our commission study video on this
but we looked at the same product
same company
that's juiced for cash value
guaranteed and non-guaranteed
but to sum it up
different company
but that's a different company
with a lower commission rate
but really with a minimum premium.
What is in yellow
is your breakeven point
when he gets back
his $2,000,000 total that has gone in
$2,060,000
the $1,500,000 plus the $560,000
1035 exchange
there's the difference
in cash value over time
guaranteed it was even more significant
when you look at the guaranteed values
but here's the stark difference
the agent commission
especially upfront
it's massive isn't it?
It's almost 5X
really when you break it down
no I'm sorry 6X.
My point to all of this
is you must directly answer questions
when people ask
and do all the other stuff too.
So I hope you enjoyed this one
if you have any questions
please reach out anytime
please hit the like button
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it does help us
and we'll talk to you soon.
Thanks again.
Hey guys Steve Parisi here
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